Rishi Sunak is pushing ahead with Liz Truss’s plan to axe the cap on bankers’ bonuses despite warnings that boosting bumper pay-outs for the rich is “obscene”.
Scrapping the limit on multimillion-pound bonuses for high earners is one of the only policies to survive the disastrous “Trussonomics” period last autumn.
Mr Sunak has approved his predecessor’s policy to get rid of the post-Brexit rules around capping bonuses – inherited from the EU from when the UK was still a member.
It comes around a year after former chancellor Kwasi Kwarteng first revealed plans to change the bonus rules as part of the mini-Budget fiasco which sparked market panic.
Even Boris Johnson had reportedly backed away from taking the step because he feared a huge political backlash during the cost of living crisis.
On Tuesday the Financial Conduct Authority (FCA) and Bank of England’s Prudential Regulatory Authority (PRA) confirmed that the current bonus cap will be lifted on 31 October.
The move – part of a bid to help London’s financial centre fend off competitors after Brexit – was immediately condemned by unions as “an insult to working people”.
TUC general secretary Paul Nowak said it was an “obscene decision”, adding: “City financiers are already enjoying bumper bonuses. They don’t need another helping hand from the Conservatives.”
“At a time when millions up and down the country are struggling to make ends meet – this is an insult to working people,” said the TUC boss. “Rishi Sunak has shown once again that he is more interested in feather-nesting the super-wealthy than helping struggling families.”
Labour leader Sir Keir Starmer previously attacked the plan as amounting to a “pay rises for bankers, pay cuts for district nurses”.
The cap – introduced despite UK opposition by the EU in 2014 in the wake of the banking crisis – requires bonuses to be limited to no more than 100 per cent of fixed pay, or double that with shareholder approval.
The cap is believed to have irritated US investment banks that employ tens of thousands of staff in London, because Wall Street typically offers lower fixed salaries with big performance-related bonuses.
The FCA and the PRA said on Tuesday that axing the cap would allow for “prudent risk-taking” in a bid to boost competitiveness in the City.
A spokesperson said: “The removal of the bonus cap gives firms the freedom to restructure their pay over time, within the framework of the regulators’ rules on variable remuneration which aim to better align remuneration with prudent risk-taking.”
Evading responsibility for the move, a Treasury spokesman said: “Decisions on renumeration in the banking sector are for the PRA as the independent statutory regulator.”
Criticising the move, financial commentator Paul Lewis said: “Apparently bankers only work to their best if they are paid more than three times their actual salary.”
Tax campaigner Richard Murphy also attacked the changes on Twitter / X. “As if evidence was required that Tory UK is run for the benefit of bankers,” he said.